Hospitals have grown too big

Nursing staff now more productive thanks to technology. (Photo: ANP)

Over the last decade, hospitals in the Netherlands have become an impressive 19 percent more productive. Of this gain, 5 percent was lost due to inefficiencies of scale.

Economists from the faculty of Technology, Policy & Management presented their findings on the productivity and efficiency in Dutch hospitals between 2003 and 2009 at a congress held at the Ministry of Health last Thursday. The researchers from the centre for innovations and public sector efficiency studies (Ipse studies) essentially told the audience that Dutch hospitals had grown beyond their optimal growth levels: increasing production capacity by 1 percent boosts the costs by 1.23 percent. “Growth of scale thus hinders the development of productivity,” the report states. And yet, although the wave of hospital fusions may have dissipated, fusions do still occur.

So how did the Ministry of Health react to the report’s findings? There hasn’t been an official reaction, yet, but according to econometrician, Bart van Hulst (MSc), the ministry employees who were present were not convinced that mega-hospitals work less efficiently. No ban on fusions so far.

The researchers gathered data from around 90 Dutch hospitals over a seven-year period, which amounted to 500 observations, and from this data they calculated the cost function: how the cost of a hospital depends on the product (in this case: treating the patient) and the input prices, such as hospital staff, facility costs and materials used.

Their analysis shows a formidable increase (+35 percent) in the productivity of the nursing staff. In other words: one-third more patients were treated. The explanation for this is the shorter duration of hospital stays, thanks to new treatment methods and insights.

The researchers do note however that there is an increased use of medication and that a patient leaving hospital often needs additional care to recover, be it at home or in a nursing home, both of which are less expensive than a hospital bed.

Researcher Dr Jos Blank suggests that large hospitals may improve their productivity by focussing on a limited number of specialisations. A future Ipse study on innovations and productivity increase may shed light on this issue.